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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Daido Asia Japan Company Ltd v. Rothen [2001] EWHC Ch 163 (24th July, 2001)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2001/163.html
Cite as: [2001] EWHC 163 (Ch), [2001] EWHC Ch 163, [2002] BCC 589

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Daido Asia Japan Company Ltd v. Rothen [2001] EWHC Ch 163 (24th July, 2001)

CH 1997 D 5956

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand

London WC2A 2LL

Tuesday, 24 July 2001

 

Before

MR JUSTICE LAWRENCE COLLINS

Between
 
DAIDO ASIA JAPAN COMPANY LIMITED
Claimant
 

and

 
 
INES CHARLOTTE ROTHEN

Defendant

 

JUDGMENT

(Approved by the Court for handing down)

 

Mr Siward Atkins (instructed by Denton Wilde Sapte) appeared on behalf of the Claimant.

The Defendant appeared in person.

Hearing: 11 July 2001

I direct that pursuant to CPR 39A para 6.1 no official shorthand note shall be taken of

this judgment and that copies of this version as handed down may be treated as authentic

(Mr Justice Lawrence Collins)

Mr Justice Lawrence Collins

I Introduction

1. In this action the claimant ("Daido"), a Japanese company, alleges it has suffered damage as a result of a false representation made to it by the defendant, Mrs Rothen, who ran VIB International Ltd. ("VIB"), a company which, among other activities, carried on a business of buying goods from high quality brand leaders and selling them abroad for "the grey market" or parallel import markets. Daido claims that Mrs Rothen required payment of the balance of the purchase price for a shipment of tea from Fortnum & Mason ("F&M"), when in fact Mrs Rothen well knew that F&M had no intention of supplying the tea because it considered that previous shipments had been placed on the retail market in Japan in contravention of their terms of trade.

2. The action came on for trial in February 2001, but Mrs Rothen had not served any evidence. She was unrepresented and applied successfully for an adjournment to prepare her case. Mr Atkins, who appeared for Daido, had very properly put before the court a point of law which might have provided Mrs Rothen with a defence, but which had not been taken by her or her former advisers, and she has adopted it for the purposes of this trial. The point is that in Standard Chartered Bank v. Pakistan National Shipping Corp. (No.2) [2000] 1 Lloyd's Rep 218 the Court of Appeal held that when a false representation is made by a director on behalf of a company, only the company, and not the director, is civilly liable in deceit. In addition Mrs Rothen has taken the point that Daido is not entitled to sue her because each of them was engaged in a course of conduct designed to deceive F&M into selling goods for promotional purposes when in fact each of them knew that the goods were destined for the retail market in breach of F&M's conditions of sale. Mrs Rothen represented herself at this trial, and accepted that she had nothing to say on the questions of law, but Mr Atkins very fairly put both sides to me on those points, and I will deal with them in section IV below.

II The facts

3. Mrs Rothen was one of two shareholder-directors of VIB, but the company was run solely by her. One of its customers was Daido. After contact first made in late 1995 VIB supplied to Strand Europe (a business in which Daido at that time had an interest) and subsequently to Daido itself, tea produced by F&M. The evidence was that F&M tea, like other high class brand products, can be sold at high prices on the Japanese retail market. F&M had its own distribution network, and was only prepared to accept orders of a commercial size from other customers if it was satisfied that the product would not directly or indirectly end up as a retail sale.

4. Daido was in the business of supplying building materials, and VIB informed F&M that Daido would use the tea for corporate gifts. Both VIB and Daido signed an acknowledgement to the effect that they had read and understood F&M's terms of trading, which required buyers to inform F&M of end use detail so that F&M could be sure that no retail sales would occur, and informing buyers that goods supplied to substantial buyers would be coded. VIB was able to obtain the tea for Daido on the basis, which was not in fact the case, that Daido was going to use the tea in small quantities for corporate or promotional purposes. The tins supplied by F&M contained codes which would identify the purchaser and enable F&M to police parallel imports. VIB agreed with Daido that it would arrange for the codes to be removed with a view to disguising the source of the goods once they reached the retail market.

5. Daido placed a total of three orders with VIB for the supply of F&M tea. The first two orders were completed satisfactorily. A third order was placed on November 18, 1996 for tea at a price of £82,945.44. F&M was prepared to accept that order, which was placed on it by VIB as principal, on condition that it was paid a deposit, and on November 18 Carolyn Simpson, the business sales manager of F&M, wrote to Mrs Rothen at VIB confirming the order provided that a deposit was made by the end of that week. On that day Mrs Rothen wrote to Mr Yamaguchi and Ms Inoue of Daido, enclosing a copy letter from F&M. In her fax she said:

"You will see from the letter that they will be able to deliver 10th Jan. 97, providing you will send the 15% deposit by the end of this week. If you agree with it, the[n] please send me your P.Order and I will send you our invoice by return, to get it all slotted in."

6. The attached copy letter from Carolyn Simpson was as follows:

"I am pleased to confirm that we are delighted to accept the third Daido order which will be delivered during the week ending 10 January 1997 provided that a 15% deposit is made by the end of this week. As the delivery takes place immediately after the Christmas break it will be necessary that the balance of payment is made by 23 December to allow the paperwork to be completed before the tea warehouse closes down. If this is not possible then delivery will have to be put off until the end of the following week. Please let me know which option you would like to take. I look forward to receiving your official order by return."

7. Although the copy letter required a 15% deposit, in fact the letter from Ms Simpson required "a 10% deposit", and Mrs Rothen, before sending it to Daido, had inserted the figure 15% instead of the figure 10% by deleting the reference to 10% and by over-typing 15% (in a different type-face). Daido paid the 15% deposit requested (£12,441.82) by telegraphic transfer on November 20, 1996.

8. But the order was not fulfilled because F&M refused to supply the tea required to VIB. F&M had discovered that tea previously supplied via VIB had found its way onto the retail market in Japan. By fax dated December 17, Mr Hamilton, managing director of F&M, wrote to Mrs Rothen at VIB:

"We have been advised by our own staff in Japan that large quantities of 250g tins of our tea have been discovered in a range of outlets. The tins have all been treated in the same way - the cellophane has been slit and removed and the second line of the inkjet has been cleaned off, probably with some chemicals. The original cellophane has then been re-applied and the slit covered by a combination of a piece of Sellotape (applied in a strip so that it appears to be a seam in the cellophane) and the importer's label/sticker. The only obvious indication that the tin has been tampered with is the absence of the lot code, however this process has not been successfully completed and tins with VIB on them have been found in the displays.

The above is in direct contravention of our agreement to supply, which has been signed by yourself and guaranteed by your customer.

I therefore advise that we shall not be supplying any further merchandise."

9. Mrs Rothen sent a fax to Mr Yamaguchi of Daido on the same day. The fax produced in evidence has no automatic transmittal or receipt time on it, but the header indicates that it was sent at 3.10 a.m. so as to reach Mr Yamaguchi well within his working day. It was suggested to Mrs Rothen that it may have been sent later in the day, after the fax from Mr Hamilton. But if this was part of Daido's case, it should have produced the original fax as received in Japan which would have put the matter beyond doubt. The fax asked for the balance of the price to be paid by 23 December. Mrs Rothen said:

"The January order 00610 has to be paid BEFORE the end of this week. We need to pay F&M for that by 23rd December as the factory is shutting down for two weeks and if we pay later, i.e. in the New Year, they will not promise to deliver to our decoders on January 13th, which is my current delivery date. I look forward to receiving the balance for 00610 and the shipping invoice for your order 00606 by Thursday of this week, so I can T/T F&M on Friday. I hope that this is convenient for you."

10. Mr Yamaguchi replied on the same day, and said that it would be difficult for Daido to make payment by telegraphic transfer that week, but that it could pay on January 5, and asked Mrs Rothen to confirm with F&M if that were possible. Mrs Rothen's evidence was that Ms Simpson confirmed that payment could be made then. If that is so, she must then have told Daido. I shall assume in Mrs Rothen's favour that her exchange of faxes with Mr Yamaguchi (and therefore also the telephone calls about the date of payment) occurred before she received the letter from Mr Hamilton of F&M informing her that F&M would not make any further supplies to VIB.

11. Mrs Rothen, taking the view that she had arranged efficiently for the decoding to be done in respect of the previous VIB shipments, considered that the source of the tea about which F&M was complaining was Strand Europe and not Daido, and on December 20 wrote to Mr Hamilton to say that Daido had had nothing to do with it, and to ask for a meeting to resolve matters. She endeavoured without success to reach Mr Hamilton by telephone on December 27, 1996 and January 6, 1997. None of this was reported by Mrs Rothen to Mr Yamaguchi, and the balance of the price (£70,503) was transmitted to VIB's account with the Clydesdale Bank on January 6, 1997.

12. On January 7 Mr Hamilton wrote to Mrs Rothen to say that F&M were totally satisfied with the information it had received and its veracity, and he refused to have a meeting. On the same day Mrs Rothen wrote to him to say that Daido were expecting the January order to ahead, and that she had the money in the bank, and that she wished to transfer it on the understanding that F&M was fulfilling the order. But Mr Hamilton again made it clear in response that F&M would not be supplying VIB with any further merchandise.

13. F&M had therefore said clearly on three occasions that it would not be supplying the goods, but when Ms Emoto of Daido asked on January 8 for details of the shipping arrangements, Mrs Rothen replied: "Will have shipment date before end of week. I am in consultation with F&M at present." On the following day she caused alarm bells to ring at Daido when she faxed to Mr Yamaguchi: "F&M Tea January shipment. I have problem at the moment. Will know more on Friday – will come back to you. I realise the urgency." It was only then, in telephone conversations with Daido's managing director, Mr Fukasawa, on 10 January and a fax of 13 January that she told him what had had happened. She finally admitted that F&M was "refusing to service the January order" and gave the reasons. The fax also indicated, untruthfully, that the problem had emerged only the previous week.

14. On several occasions in January 1997 Daido asked Mrs Rothen for a refund if the tea was not to be delivered. This request was refused, however, for the reason that VIB was entitled to retain the money to defend any proceedings brought by F&M against VIB. Daido then made further requests for a refund, but these were ignored until February 24, 1997, when Mrs Rothen sent a fax saying that everything was then in the hands of VIB's solicitors.

15. Subsequently, and unknown to Daido, F&M returned £6,552.53 to VIB on April 9, 1997. Proceedings were thereafter instituted by Daido against VIB and a judgment was obtained on June 19, 1997. VIB then went into insolvent liquidation on July 25, 1997 with a substantial deficiency. Mrs Rothen had absolutely no explanation for where the money had gone. It was suggested to Mrs Rothen that the funds received from Daido had been used to pay off VIB's overdraft, but no documentary evidence was sought for this trial by Daido from the liquidator of VIB or the bank, and I refused to allow this matter to be put to Mrs Rothen.

III Conclusions

16. Mrs Rothen gave evidence and was cross-examined. She is an intelligent and articulate woman, but I gained a most unsatisfactory impression of her honesty. She was completely unrepentant about what can only be described as her forgery of the F&M request for a deposit, altering it fraudulently from 10% to 15%. She accepted that she had deceived Daido about the deposit. But for her that did not matter because it had not made any difference. She considered that it was an acceptable practice because Daido would lose nothing since whatever it paid by way of deposit would be offset against the final price, and she needed the difference to pay commissions.

17. She accepted that on three occasions F&M had said that it was not going to supply any more tea, and she accepted that she had not told Daido in order not to deter it from sending the balance. Her plan was to "force" F&M to supply by telling it that Daido had already paid. Her evidence was that once F&M had both the deposit and the balance it would be compelled to ship the third order, even if it never supplied again. She accepted that if she told Daido of the problem it would not have paid and there would have been no question of the order being fulfilled. She said in her witness statement that to have told Daido would have resulted in her not being able to right the situation, and she deliberately decided to keep quiet.

18. I accept the submission of Mr Atkins on behalf of Daido that the effect of her evidence was that she accepted all of the elements necessary for him to make out a case of deceit. F&M had no present intention of fulfilling the order from December 17, and that intention was unwavering and was expressed as such to her. The combined effect of her fax to Mr Yamaguchi of December 17, and her silence thereafter about the communications from F&M was a representation that F&M had an intention to supply the tea. I do not accept her contention that it was simply a true statement that contractually the balance was due. The purpose of her silence was to induce Daido to send the balance of the price. Daido sent the balance of the price in reliance on her representation that F&M intended to fulfil the order. It does not in any way relieve her of liability if she thought that by extracting the balance of the price she would be able to persuade F&M to change its mind and supply the teas. The fact that she spoke of changing its attitude proves that she knew, if proof were needed, that its intention was not to supply. Her attitude pre-supposed that lack of intention, and consequently she knew that the representation was false.

19. As a result Daido has lost (a) £70,503.62, being the balance of the purchase price paid for the order on January 6, 1997 and (b) £3,701.71, being the costs of obtaining judgment against VIB.

IV The questions of law

20. Mrs Rothen is therefore liable to Daido unless the two points taken by her against Daido afford her a defence.

Ex turpi causa

21. There is no doubt that Daido and VIB deliberately deceived F&M in order to obtain supplies to be sold on the "grey market." Does this affect Daido's right to sue Mrs Rothen for the deceit alleged, namely to procure them to pay for a shipment which she well knew F&M were refusing to supply? The question of the effect of a claimant's wrongdoing in tort is not finally settled, and a variety of approaches has been taken or suggested: see, e.g. Saunders v. Edwards [1987] I WLR 1116; Pitts v. Hunt [1991] 1 QB 24; Kirkham v. Chief Constable of Manchester Police [1990] 2 QB 24; Clunis v. Camden and Islington Health Authority [1998] QB 978, and especially Tinsley v. Milligan [1994] 1 AC 340 (not a tort case). But for the purposes of this claim in deceit, the most relevant authority is that of the Court of Appeal in Standard Chartered Bank v. Pakistan National Shipping Corp. (No.2) [2000] 1 Lloyd's Rep 218. Evans LJ approved the summary of the law by Cresswell J [1998] 1 Lloyd's Rep. 684, 706, who had held that the authorities supported the pragmatic approach described by Bingham LJ in Saunders v. Edwards [1987] 1 WLR 1116, 1134:

"Where the plaintiff's action in truth arises directly ex turpi causa, he is likely to fail ... Where the plaintiff has suffered a genuine wrong, to which the allegedly unlawful conduct is incidental, he is likely to succeed."

22. What had to be taken into account was the relative turpitude of the claimant's conduct, as well as the extent to which it contributed to the loss. For Aldous LJ the principle was that to be derived from Tinsley v. Milligan [1994] 1 AC 340: "There is in my view but one principle that is applicable to actions based upon contract, tort or recovery of property. It is, that public policy requires that the Courts will not lend their aid to a man who founds his action upon an immoral or illegal act. The action will not be founded upon an immoral or illegal act, if it can be pleaded and proved without reliance upon such an act" ([2000] 1 Lloyd's Rep. at 232).

23. In this case Daido does not have to rely on its deception of F&M to found its cause of action against VIB. Second, its conduct and its connection with Mrs Rothen's deceit are not such that to afford relief to Daido would affront the public conscience. In my judgment, therefore, the ex turpi causa doctrine does not afford a defence to Mrs Rothen.

Director's liability for deceit

24. The next point is more difficult and arises from another aspect of the decision of the Court of Appeal in Standard Chartered Bank v. Pakistan National Shipping Corp. (No.2). The question is whether a director who makes a false representation on behalf of his company on company letterhead is personally liable in deceit, or whether only the company is liable.

25. It is necessary to start from first principles. The director is an agent of the company: see, e.g. Freeman & Lockyer v. Buckhurst Properties (Magnal) Ltd [1964] 2 QB 480. An agent who commits a tort on behalf of his principal is personally responsible. Accordingly an agent who knowingly makes a false representation on behalf of the principal in the course of his employment will be liable in deceit, and the principal will be vicariously liable. This is so whether or not the fraud is committed for the benefit of the principal or for the benefit of the agent: Lloyd v. Grace Smith & Co. [1912] AC 716, explaining and approving Barwick v. English Joint Stock Bank (1867) LR 2 Ex 259. In Armagas S.A. v. Mundogas S.A. [1986] AC 717 the Court of Appeal and the House of Lords re-affirmed this line of authority: see 737-740 and 779-782. See also Credit Lyonnais v. ECGD [2000] 1 AC 486, 494.

26. Those were not cases of deceit practised by a director but the same principle has been held to apply to directors. In Edgington v. Fitzmaurice (1885) 29 Ch D. 459 directors of a company had issued a prospectus which falsely stated that the debenture issue was for the purpose of completing alterations to the buildings of the company, to purchase horses and vans and to develop the trade of the company, when in fact the object was to pay off pressing liabilities. The company having become insolvent, the directors were liable in an action for deceit. In a well-known passage, Bowen LJ said (at 481-2):

"This is an action for deceit, in which the Plaintiff complains that he was induced to take certain debentures by the misrepresentations of the Defendants, and that he sustained damage thereby…In order to sustain his action he must first prove that there was a statement as to facts which was false; and secondly, that it was false to the knowledge of the Defendants, or that they made it not caring whether it was true or false. For it is immaterial whether they made the statement knowing it to be untrue, or recklessly, without caring whether it was true or not, because to make a statement recklessly for the purposes of influencing another person is dishonest. It is also clear that it is wholly immaterial with what object the lie is told. ... But, lastly, when you have proved that the statement was false, you must further shew that the plaintiff has acted upon it and has sustained damage by so doing: you must shew that the statement was either the sole cause of the plaintiff's act, or materially contributed to his so acting."

27. This is a classic statement of liability for deceit, and it was made in the context of the liability of directors for the fraudulent issue of a prospectus in the name of a company. It is plain from the judgments of Denman J at first instance and of Cotton, Bowen and Fry LJJ (at 478, 481 and 484) that it was an ordinary action of deceit against the directors, who were liable because they had authorised the issue of a prospectus which they knew to be false or were reckless as to whether it was true or not. There was no suggestion that the directors might not have been liable because their statements were made on behalf of the company, or because they intended the recipients to subscribe for debentures of the company rather than to induce them to benefit the directors personally. Nor is there any suggestion that they were liable on the ground that they had procured the company to make false representations. So also in Cargill v. Bower (1878) 10 Ch D 502 Fry J., held that directors of a company who had authorised a fraudulent prospectus and sent fraudulent letters were responsible in a personal action against them.

28. In those cases the directors had fulfilled all the necessary conditions for liability for the tort of deceit: they had made false statements knowing they were false or recklessly, and had intended the recipients to act on them. Where, however, liability is alleged on the basis of negligent mis-statement under Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465 or on the assumption of responsibility for the provision of services under Henderson v. Merritt Syndicates Ltd. [1995] 2 AC 145 it is a necessary condition of liability that there be a relationship between the claimant and the defendant in which the defendant has assumed responsibility to the claimant.

29. Accordingly, and entirely in conformity with principle, the House of Lords has held that a director who makes the allegedly negligent statement or provides the services will only be liable if he personally fulfils the conditions necessary for the attribution of responsibility. In Williams v. Natural Life Health Foods Ltd. [1998] 1 WLR 830 it was held that the managing director and principal shareholder of a company in the health food shop franchise business was not responsible for allegedly negligent advice given by him on behalf of the company. Lord Steyn said (at 835, 838-9):

"What matters is not that the liability of the shareholders of a company is limited but that a company is a separate entity, distinct from its directors, servants or other agents….Whether the principal is a company or a natural person, someone acting on his behalf may incur personal liability in tort as well as imposing vicarious or attributed liability upon his principal. But in order to establish personal liability under the principle of Hedley Byrne, which requires the existence of a special relationship between plaintiff and tortfeasor, it is not sufficient that there should have been a special relationship with the principal. There must have been an assumption of responsibility such as to create a special relationship with the director or employee himself.

…..In the present case liability of the company is dependent on a special responsibility. Mr. Mistlin was a stranger to that particular relationship. He cannot therefore be liable as a joint tortfeasor with the company. If he is to be held liable to the plaintiffs, it could only be on the basis of a special relationship between himself and the plaintiffs. There was none."

30. It is plain that what Lord Steyn is saying in these passages is that a director is an agent of the company who can incur personal liability on his own behalf, as well as making the company vicariously liable. But that in order to incur personal liability under Hedley Byrne the director must himself fulfil the necessary requirements for liability under that head including a special relationship involving the assumption of responsibility. It does not follow from the fact that the company had that relationship that the director also had it.

31. There is a quite separate principle relating to the liability of a director for something done by other agents or employees of the company. The starting point is that it does not follow that, where a company has done something through its agents which gives rise to a tort liability, a director who was not personally responsible for doing it is necessarily liable. There is abundant authority for the principle stated in Clerk and Lindsell, Torts, 18th ed. 2000, p.193 that the directors cannot be held liable, merely by reason of their position as directors, for the torts of the employees of the company, unless the directors ordered or procured the acts to be done: e.g. Performing Right Society v. Ciryl Theatrical Syndicate [1924] 1 KB 1, 14-15, applying Rainham Chemical Works v. Belvedere Guano Co. [1921] 2 AC 476. This principle was recently re-affirmed in C Evans Ltd v. Spritebrand Ltd. [1985] 1 WLR 317, where Slade LJ said (at 329):

"The authorities…. clearly show that a director of a company is not automatically to be identified with his company for the purpose of the law of tort, however small the company may be and however powerful his control over its affairs. Commercial enterprise and adventure is not to be discouraged by subjecting a director to such onerous potential liabilities. In every case where it is sought to make him liable for his company's torts, it is necessary to examine with care what part he played personally in regard to the act or acts complained of."

32. Consequently the state of the authorities before the decision in Standard Chartered Bank v. Pakistan National Shipping Corp. (No.2) [2000] 1 Lloyd's Rep 218 was this: a director who made a fraudulent statement on behalf of a company was liable to the addressee of the representation in deceit, and the company would be vicariously liable (and probably also directly liable if the director were the directing mind and will of the company). The director would be liable even if the object and effect of the deceit was to benefit the company rather than the director. If an employee of the company made a fraudulent statement a director would be liable if he procured the making of the statement with knowledge that it was false. A director would only be personally liable for a negligent mis-statement made on behalf of a company if he personally fulfilled the conditions necessary for the attribution of responsibility.

33. There was no authority which suggested that that a director who deliberately made a false statement on behalf of the company would not be liable in deceit, and all the authority, especially Edgington v. Fitzmaurice, was to the effect directors and other agents of companies would be liable. Indeed, the contrary does not seem ever to have been argued.

34. But in the Standard Chartered Bank case it was held that a director who deliberately presented fraudulent documents on behalf of a company was not liable in deceit. In that case Mr Mehra, the managing director of Oakprime International Ltd. ("Oakprime"), who were sellers of bitumen, persuaded the defendant shipowners to authorise their agents to sign a bill of lading stating that the goods had been shipped on a date which they all knew to be false. Mr Mehra subsequently wrote under the letterhead of Oakprime to Standard Chartered Bank ("SCB"), the confirming bank under letters of credit issued on the instructions of the Vietnamese buyers, enclosing the fraudulent bill of lading. One of the questions was whether Mr Mehra was responsible in damages to SCB for the deceit. Cresswell J held that he was liable, but the Court of Appeal held that the representations were made by Oakprime, notwithstanding that they were contained in letters signed by Mr Mehra, and that Mr Mehra was therefore not liable.

35. Aldous LJ emphasised that SCB had relied on the statements as being by Oakprime, and not as statements of Mr Mehra. He said that, apart from cases where it has been held permissible to lift the corporate veil, directors or employees acting as such will only be liable for tortious acts committed during the course of their employment in three circumstances. The first was the case where a director or an employee himself commits the tort. Aldous LJ gave the example of the lorry driver who is involved in an accident in the course of his employment. Although Mr Mehra was the person who was responsible for making the misrepresentations, he did not commit the deceit himself, because the representations were made by Oakprime and not by him, and SCB relied upon them as representations by Oakprime and not as representations by Mr Mehra.

36. The second way that a director or an employee would become liable was a branch of the first: a director or an employee may, when carrying out his duties for the company, assume a personal liability, and Aldous LJ said that guidance in such cases could be obtained from Williams v. Natural Life Health Foods Ltd., [1998] 1 WLR 830. Although Lord Steyn had in mind the cause of action in negligence, the principles stated by him were applicable to other torts, in particular to deceit. There must be an assumption of responsibility such as to create a special relationship by the plaintiff with the director or employee himself. It was necessary to enquire whether the director conveyed directly or indirectly to the plaintiff that he assumed a personal responsibility towards the plaintiff. But Mr Mehra, by his actions or statements never led SCB to believe he was assuming personal responsibility for the misrepresentations. SCB believed they were dealing with Oakprime. It followed that Mr Mehra could not be held liable on that ground. The third ground of liability arose when the director did not carry out the tortious act himself nor did he assume liability for it, but he procured and induced another, the company, to commit the tort. But that had not been pleaded, and an application to amend was refused.

37. Evans LJ agreed with Aldous LJ. His starting point was this:

"The representations giving rise to liability in deceit were made by the company, notwithstanding that they were contained in letters signed by Mr. Mehra on behalf of the company or that they arose from his conduct in presenting the documents on behalf of the company, as he did. Even when the director makes the false statement, and the requisite knowledge of its falsity and the intention that it shall be acted upon are both his, nevertheless the fact remains that for the purposes of civil liability (the position in criminal law may be different) the statement is attributed to the company. The question then arises whether in such a case the director is free from personal liability".

38. He went on to reason as follows: (a) the question whether the director might be held liable for the company's tort was the converse of vicarious liability; (b) the mere fact that he was director did not suffice, but he might be liable if he procured the acts; (c) Williams v. Natural Life Health Foods Ltd [1998] 1 WLR 830 excluded any suggestion that the director was personally liable whenever his acts were sufficient to make the company liable. Accordingly it was "necessary… to apply the principles of tortious liability strictly in accordance with this rule of company law" (at 231).

39. With the exception of Edgington v. Fitzmaurice (1885) 29 Ch D 459, which was cited solely on the question of causation, none of the earlier authorities making an agent liable for false representations on behalf of a principal was cited in Standard Chartered Bank v. Pakistan National Shipping Corp. (No.2). There is no reason to believe that those authorities were affected by Williams v. Natural Health Foods Ltd. That decision confirms that a director who commits a tort is personally liable. What it decided was that the director must himself fulfil the necessary conditions for liability. In deceit those conditions are authoritatively set out in Edgington v. Fitzmaurice in the context of misrepresentations by directors on behalf of a company, and they do not include a condition that the addressee was concerned with the identity of the director or relied on him, as opposed to his statement.

40. Although the decision in Standard Chartered Bank has been the subject of criticism judicially (Noel v. Poland, June 14, 2001, Toulson J, not yet reported) and academically (Watts (2000) 116 LQR 525), I am bound by it since the preponderant view (although not the only one) is that a judge at first instance may not refuse to follow a decision of the Court of Appeal on the ground that it is inconsistent with prior authority, even if that authority (both in the Court of Appeal and in the House of Lords) was not cited to the Court of Appeal on the point in question.

41. There are, however, two significant distinctions between this case and the Standard Chartered Bank case. The first is that in that case Aldous LJ emphasised that SCB relied on Mr Mehra's statements as statements of Oakprime and not as statements of Mr Mehra: see pp. 233, 235. In this case Mr Fukasawa's evidence was that Daido had sent the money because Ms Rothen had said in her letter that F&M would be delivering the tea. She had said in her letter that if payment were not made until the New Year delivery on January 13, 1997 could not be guaranteed. His evidence was that he relied on this as an accurate statement, and as a result the balance of the price was sent to VIB. Although the fax of December 17, 1996 is written on VIB notepaper, Daido and its officers and employees dealt with Mrs Rothen personally, and the evidence is that they relied on her personally.

42. I do not consider, however, that I should distinguish the Standard Chartered Bank case on this ground, because I am not satisfied that the distinction would be a principled one. It is not necessary to do so, because there is another important and more compelling respect in which this case differs from the Standard Chartered Bank case. As I have said, it has long been the law that a director who knowingly procures a company to commit a tort will be liable as a joint tortfeasor, and this is confirmed by Standard Chartered Bank. According to the Official Receiver's report in the liquidation of VIB Mrs Rothen was alone responsible for running VIB's affairs and there is, and could be, no suggestion that anyone else in VIB was or could have been responsible for the deceit. It was entirely her responsibility.

43. In the Standard Chartered Bank case there was no plea that Mr Mehra had procured Oakprime to commit the deceit, and an amendment to that effect was refused by the Court of Appeal even though no further evidence would have been necessary. But in this case there is a plea that Mrs Rothen authorised, directed and procured the deceit. It may be somewhat artificial to regard a director who personally sends a false letter on behalf of a company as procuring the company to send it, but I am satisfied that in the light of the decision of the Court of Appeal that is an analysis which I can and should apply. On that analysis Mrs Rothen procured VIB to send the letter, and is equally liable for the tort of deceit. She is therefore liable in damages as claimed.

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© 2001 Crown Copyright


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